HOUSE BILL NO. 278
AN ACT TO AMEND CHAPTER 17 OF TITLE 6 OF THE DELAWARE CODE WITH REFERENCE TO LIMITED PARTNERSHIPS.
Be it enacted by the General Assembly of the State of Delaware:
Section 1. Chapter 17, Title 6 of the Delaware Code, is amended by striking all of Chapter 17 and inserting in lieu thereof a new Chapter 17 to read as follows :
CHAPTER 17. LIMITED PARTNERSHIPS
§ 1701. Limited partnership defined
A limited partnership is a partnership formed by two or more persons under the provisions of Section 1702 of this Chapter having as members one or more general partners and one or more limited partners. The limited partner or partners as such shall not be bound by the obligations of the partnership.
§ 1702. Formation
(a) Two or more persons desiring to form a limited partnership shall-
1. Sign and swear to a certificate, which shall state:
A. The name of the partnership,
B. The character of the business,
C. The address (which shall include the street, number, city and county) of the partnership's registered office in this State which may, but need not, be the same as its place of business, and the name of the registered agent for service of process of the partnership which agent may be either an individual resident in this State whose business office is identical with the partnership's registered office, or a domestic corporation, or a foreign corporation authorized to transact business in this State,
D. The name and place of residence of each member ; general and limited partners being respectively registered,
E. The term for which the partnership is to exist,
F. The amount of cash and a description of and the agreed value of the other property, or of the services, contributed by each limited partner,
G. The additional contributions, if any, agreed to be made by each limited partner and the times at which or events on the happening of which they shall be made,
H. The time, if agreed upon, when the contribution of each limited partner is to be returned,
. The share of the profits or the compensation by way of income which each limited partner shall receive by reason of his contribution,
A. The right, if given, of a limited partner to substitute an assignee as contributor in his place, and the terms and conditions of the substitution,
B. The right, if given, of the partners to admit additional limited partners,
C. The right, if given, of one or more of the limited partners to priority over other limited partners, as to contributions or as to compensation by way of income, and the nature of such priority,
D. The right, if given, of the remaining general partner or partners to continue the business on the death, retirement, bankruptcy or mental illness of a general partner, and
E. The right, if given, of a limited partner to demand and receive property other than cash in return for his contribution.
2. File for record the certificate in the office of the Secretary of State. Such filing shall make it unnecessary to file any other documents under Chapter 31, Title 6.
(b) A limited partnership is formed if there has been substantial compliance in good faith with the requirements of subsection (a).
§ 1703. Business which may be carried on
A limited partnership may carry on any business which a partnership without limited partners may carry on, except the business of granting policies of insurance, or assuming insurance risks or banking as defined in Section 126, Title 8.
§ 1704. Character of limited partner's contribution
The contributions of a limited partner may be cash, property, or services.
§ 1705. A name not to contain surname of limited partner; exceptions
(a) The surname of a limited partner shall not appear in the partnership name, unless
1. It is also the surname of a general partner, or
0. Prior to the time when the limited partner became such the business had been carried on under a name in which his surname appeared.
(b) A limited partner whose name appears in a partnership name contrary to the provisions of subsection (a) is liable as a general partner to partnership creditors who extend credit to the partnership without actual knowledge that he is not a general partner.
§ 1706. Liability for false statements in certificate
If the certificate contains a false statement, one who suffers loss by reliance on such statement may hold liable any party to the certificate who knew or should have known the statement to be false
1. At the time he signed the certificate, or
0. Subsequently, but within a sufficient time before the statement was relied upon to enable him to cancel or amend the certificate, or to file a petition for its cancellation or amendment as provided in subsection (c) of Section 1725 of this Chapter.
§ 1707. Limited partner not liable to creditors
(a) A limited partner shall not become liable as a general partner unless, in addition to the exercise of his rights and powers as a limited partner, he takes part in the control of the business, and then only to persons who transact business with the partnership reasonably believing that the limited partner is a general partner.
(b) A limited partner shall not be deemed to take part in the control of the business by virtue of his possessing and/or exercising a power to
1. consult with and advise the general partner (s) as to the conduct of the business;
2. act as surety for the partnership;
3. elect or remove a general partner;
4. terminate the partnership;
5. amend the partnership agreement;
6. approve or disapprove such material matters related to the business of the partnership as shall be stated in the certificate and in the partnership agreement.
(c) The statement of powers set forth in subsection (b) shall not be construed as exclusive or as indicating that any other powers possessed or exercised by a limited partner shall be sufficient to cause such limited partner to be deemed to take part in the control of the business within the meaning of subsection (a).
(d) A limited partner has no right to participate in the partnership business within the return of his contribution as provided in sections 1715 and 1716 of this Chapter.
§ 1708. Admission of additional limited partners
After the formation of a limited partnership, additional limited partners may be admitted upon filing an amendment to the original certificate in accordance with the requirements of Section 1725 of this Chapter.
§ 1709. Rights, powers and liabilities of a general partner
(a) A General partner shall have all the rights and powers and be subject to all the restrictions and liabilities of a partner in a partnership without limited partners, except that without the written consent or ratification of the specific act by all the limited partners, a general partner or all of the general partners have no authority to
1. Do any act in contravention of the certificate,
2. Do any act which would make it impossible to carry on the ordinary business of the partnership,
3. Confess a judgment against the partnership,
4. Possess partnership property, or assign their rights in specific partnership property, for other than a partnership purpose,
5. Admit a person as a general partner, unless the right so to do is given in the certificate,
6. Admit a person as a limited partner, unless the right so to do is given in the certificate,
7. Continue the business with partnership property on the death, retirement, bankruptcy, or mental illness of a general partner, unless the right so to do is given in the certificate.
§ 1710. Rights of a limited partner
(a) A limited partner shall have the same rights as a general partner to
1. At all times inspect and copy any of the partnership books,
0. Have on demand true and full information of all things affecting the partnership, and a formal account of partnership affairs whenever circumstances render it just and reasonable, and
1. Have dissolution and winding up by decree of court,
2. A limited partner shall have the right to receive a share of the profits or other compensation by way of income, and to the return of his contribution as provided in sections 1715 and 1716 of this Chapter.
§ 1711. Status of person erroneously believing himself a limited partner
A person who has contributed to the capital of a business conducted by a person or partnership erroneously believing that he has become a limited partner in a limited partnership, is not, by reason of his exercise of the rights of a limited partner, a general partner with the person or in the partnership carrying on the business, or bound by the obligations of such person or partnership ; provided that on ascertaining the mistake he promptly renounces his interest in the profits of the business, or other compensation by way of income.
§ 1712. One person both general and limited partner
(a) A person may be a general partner and a limited partner in the same partnership at the same time.
(b) A person who is a general partner, and also at the same time a limited partner, shall have all the rights and powers and be subject to all the restrictions of a general partner; except that, in respect to his contribution, he shall have the rights against the other members which he would have had if he were not also a general partner.
§ 1713. Loans and other business transactions with limited partner
(a) A limited partner also may loan money to and transact other business with the partnership, and, unless he is also a general partner, receive on account of resulting claims against the partnership, with general creditors, a pro rata share of the assets. No limited partner shall in respect to any such claim
1. Receive or hold as collateral security any partnership property, or
2. Receive from a general partner or the partnership any payment, conveyance, or release from liability, if at the time the assets of the partnership are not sufficient to discharge partnership liabilities to persons not claiming as general or limited partners.
(b) The receiving of collateral security, or a payment, conveyance, or release in violation of the provisions of paragraph (1) is a fraud on the creditors of the partnership.
§ 1714. Relation of limited partners interse
Where there are several limited partners the members may agree that one or more of the limited partners shall have a priority over other limited partners as to the return of their contributions, as to their compensation by way of income, or as to any other matter. If such an agreement is made it shall be stated in the certificate, and in the absence of such a statement all the limited partners shall stand upon equal footing in proportion to their respective contributions actually made to the partnership.
§ 1715. Compensation of limited partner
A limited partner may receive from the partnership the share of the profits or the compensation by way of income stipulated for in the certificate; provided, that after such payment is made, whether from the property of the partnership or that of a general partner, the partnership assets are in excess of all liabilities of the partnership except liabilities to limited partners on account of their contributions and to general partners.
§ 1716. Withdrawal or reduction of limited partner's contribution
(a) A limited partner shall not receive from a general partner or out of partnership property any part of his contribution until
1. All liabilities of the partnership, except liabilities to general partners and to limited partners on account of their contributions, have been paid or there remains property of the partnership sufficient to pay them,
2. The consent of all members is had, unless the return of the contribution may be rightfully demanded under the provisions of subsection 6, and
3. The certificate is cancelled or so amended as to set forth the withdrawal or reduction.
(b) Subject to the provisions of subsection (a) a limited partner may rightfully demand the return of his contribution
1. On the dissolution of a partnership, or
2. When the date specified in the certificate for its return has arrived, or
3. After he has given 6 months' notice in writing to all other members, if no time is specified in the certificate either for the return of the contribution or for the dissolution of the partnership.
(c) In the absence of any statement in the certificate to the contrary or the consent of all members, a limited partner, irrespective of the nature of his contribution, has only the right to demand and receive cash in return for his contribution.
(d) A limited partner may have the partnership dissolved and its affairs wound up when
1. He rightfully but unsuccessfully demands the return of his contribution, or
2. The other liabilities of the partnership have not been paid, or the partnership property is insufficient for their payment as required by subsection (a) 1 and the limited partner would otherwise be entitled to the return of his contribution.
§ 1717. Liability of limited partner to partnership
(a) A limited partner is liable to the partnership
1. For the difference between his contribution as actually made and that stated in the certificate as having been made, and
2. For any unpaid contribution which he agreed in the certificate to make in the future at the time and on the conditions stated in the certificate.
(b) A limited partner holds as trustee for the partnership
1. Specific property stated in the certificate as contributed by him, but which was not contributed or which has been wrongfully returned, and
0. Money or other property wrongfully paid or conveyed to him on account of his contribution.
(c) The liabilities of a limited partner as set forth in this section can be waived or compromised only by the consent of all members; but a waiver or compromise shall not affect the right of a creditor of a partnership who extended credit or whose claim arose after the filing and before a cancellation or amendment of the certificate, to enforce such liabilities.
(d) When a contributor has rightfully received the return in whole or in part of the capital of his contribution, he is nevertheless liable to the partnership for any sum, not in excess of such return with interest, necessary to discharge its liabilities to all creditors who extend credit or whose claims arose before such return.
§ 1718. Nature of limited partner's interest in partnership
A limited partner's interest in the partnership is personal property.
§ 1719. Assignment of limited partner's interest
(a) A limited partner's interest is assignable.
(b) A substituted limited partner is a person admitted to all the rights of a limited partner who has died or has assigned his interest in a partnership.
(c) An assignee, who does not become a substituted limited partner, has no right to require any information or account of the partnership transactions or to inspect the partnership books; he is only entitled to receive the share of the profits or other compensation by way of income, or the return of his contribution, to which his assignor would otherwise be entitled.
(d) An assignee shall have the right to become a substituted limited partner if all the members (except the assignor) consent thereto or if the assignor, being so empowered by the certificate, gives the assignee that right.
(e) An assignee become a substituted limited partner when the certificate is appropriately amended in accordance with section 1725 of this Chapter.
(f) The substituted limited partner has all the rights and powers, and is subject to all the restrictions and liabilities of which he had no knowledge at the time he became a limited partner and which could not be ascertained from the certificate.
(g) The substitution of an assignee as a limited partner does not release the assignor from liability to the partnership under sections 1706 and 1717 of this Chapter.
§ 1720. Effect of retirement, death, mental illness or bankruptcy of a general partner
The retirement, death, mental illness or bankruptcy (as defined in Section 1502, title 6) of a general partner dissolves the partnership, unless the business is continued by the remaining general partners
1. Under a right so to do stated in the certificate, or
2. With the consent of all members.
§ 1721. Death of limited partner
(a) On the death of a limited partner his executor or administrator shall have all the rights of a limited partner for the purpose of settling his estate, and such power as the deceased had to constitute his assignee a substituted limited partner.
(b) The estate of a deceased limited partner shall be liable for all his liabilities as a limited partner.
§ 1722. Rights of creditors of limited partner
(a) On due application to a court of competent jurisdiction by any judgment creditor of a limited partner, the court may charge the interest of the indebted limited partner with payment of the unsatisfied amount of the judgment debt; and may appoint a receiver, and make all other orders, directions, and inquiries which the circumstances of the case may require.
(b) The interest may be redeemed with the separate property of any general partner, but may not be redeemed with partnership property.
(c) The remedies conferred by subsection (a) shall not be deemed exclusive of others which may exist.
(d) Nothing in this Chapter shall be held to deprive a limited partner of his statutory exemption.
§ 1723. Distribution of assets
(a) In settling accounts after dissolution the liabilities of the partnership shall be entitled to payment in the following order:
1. Those to creditors, in the order of priority as provided by law, except those to limited partners on account of their contributions, and to general partners,
2. Those to limited partners in respect to their share of the profits and other compensation by way of income on their contributions,
3. Those to limited partners in respect to the capital of their contributions,
4. Those to general partners other than for capital and profits,
5. Those to general partners in respect to profits,
6. Those to general partners in respect to capital.
(b) Subject to any statement in the certificate or to subsequent agreement, limited partners share in the partnership assets in respect to their claims for capital, and in respect to their claims for profits or for compensation by way of income on their contributions respectively, in proportion respective to the amounts of such claims.
§ 1721. When certificate shall be cancelled or amended
(a) The certificate shall be cancelled when the partnership is dissolved or all limited partners cease to be such.
(b) A certificate shall be amended when
1. There is a change in the name of the partnership or in the amount or character of the contribution of any limited partner,
2. A person is substituted as a limited partner,
0. An additional limited partner is admitted,
1. A person is admitted as a general partner,
5. A general partner retires, dies, becomes mentally ill, or bankrupt and the business is continued under section 1720 of this Chapter,
6. There is a change in the character of the business of the partnership,
7. There is a false or erroneous statement in the certificate for the dissolution of the partnership or for the return of a contribution,
0. A time is fixed for the dissolution of the partnership, or the return of a contribution, no time having been specified in the certificate, or
0. The members desire to make a change in any other statement in the certificate in order that it shall accurately represent the agreement between them.
§ 1725. Requirements for amendment and for cancellation of certificate
(a) The writing to amend a certificate shall
1. Conform to the requirements of §1702, subsection (a) 1. as far as necessary to set forth clearly the change in the certificate which it is desired to make, and
2. Be signed and sworn by all members, and an amendment substituting a limited partner or adding a limited or general partner shall be signed also by the member to be substituted or added, and when a limited partner is to be substituted, the amendment shall also be signed by the assigning limited partner.
(b) The writing to cancel a certificate shall be signed by all members.
(c) A person desiring the cancellation or amendment of a certificate, if any person designated in subsection (a) and (b) as a person who must execute the writing refuses to do so, may petition the Court of Chancery of the State of Delaware to direct a cancellation or amendment thereof.
(d) If the court finds that the petitioner has a right to have the writing executed by a person who refuses to do so, it shall order the Secretary of State where the certificate is recorded to record the cancellation or amendment of the certificate; and where the certificate is to be amended, the court shall also cause to be filed for record in said office a certified copy of its decree setting forth the amendment.
(e) A certificate is amended or cancelled when there is filed for record in the office of the Secretary of State
1. A writing in accordance with the provisions of subsection (a), or (b), or
2. A certified copy of the order of court in accordance with the provisions of subsection (d).
(f) After the certificate is duly amended in accordance with this section, the amended certificate shall thereafter be for all purposes the certificate provided for by this act.
§ 1726. Parties to actions
A contributor, unless he is a general partner, is not a proper party to proceedings by or against a partnership, except where the object is to enforce a limited partner's right against or liability to the partnership and except as provided in section 1732 of this Chapter.
§ 1727. Service of process
(a) Service of legal process upon any limited partnership of this State shall be made by delivering a copy personally to any officer, managing or general agent or general partner of the limited partnership in this State, or the registered agent of the limited partnership in this State, or by leaving it at the dwelling house or usual place of abode in this State of any such officer, managing or general agent, general partner or registered agent (if the registered agent be an individual), or at the registered office or other place of business of the limited partnership in this State. If the registered agent be a corporation, service of process upon it as such may be made by serving, in this State, a copy thereof on the president, vice-president, secretary, assistant secretary, or any director of the corporate registered agent. Service by copy left at the dwelling house or usual place of abode of any officer, managing or general agent, general partner or registered agent, or at the registered office or other place of business of the limited partnership in this State, to be effective must be delivered thereat at least 6 days before the return date of the process, and in the presence of an adult person, and the officer serving the process shall distinctly state the manner of service in his return thereto. Process returnable forthwith must be delivered personally to the officer, managing or general agent, general partner or registered agent.
(b) In case the officer whose duty it is to serve legal process cannot by due diligence serve the process in any manner provided for by subsection (a), it shall be lawful to serve the process against the limited partnership upon the Secretary of State, and the service shall be as effectual to all intents and purposes as if made in any of the ways provided for in subsection (a). Within 2 business days after service upon the Secretary of State, it shall be the duty of the Secretary of State to notify the limited partnership thereof by letter directed to the limited partnership at its last registered office, in which letter shall be enclosed a copy of the process or other papers served. It shall be the duty of the plaintiff in any action in which the process shall be issued, to pay to the Secretary of State, for use of the State, the sum of $5, which sum shall be taxed as a part of the costs in the action if the plaintiff shall prevail therein. The Secretary of State shall alphabetically enter in the "process book" the name of the plaintiff and defendant, the title of the action in which process has been served upon him, the text of the process so served and the return day thereof, and the day and hour when the service was made.
§ 1728. Name of act
This act may be cited as the Delaware Limited Partnership Act.
§ 1729. Rules of construction
(a) The rule that statutes in derogation of the common law are to be strictly construed shall have not application to this Chapter.
(b) This Chapter shall be so interpreted and construed as to effect its general purpose to make uniform the law of those states which enact it.
(c) This Chapter shall not be so construed as to impair the obligations of any contract existing when this Chapter goes into effect, nor to affect any action or proceedings begun or right accrued before this Chapter takes effect.
§ 1730. Rules for cases not provided for in this act
In any case not provided for in this Chapter the agreement between the partners and the rules of law and equity, including the law merchant, shall govern.
§ 1731. Provisions for existing limited partnerships
(a) A limited partnership formed under any statute of this State prior to the adoption of this Chapter, may become a limited partnership under this Chapter by complying with the provisions of section 1702 of this Chapter, provided the certificate sets forth
1. The amount of the original contribution of each limited partner, and the time when the contribution was made, and
2. That the property of the partnership exceeds the amount sufficient to discharge its liabilities to persons not claiming as general or limited partners.
(b) A limited partnership formed under any statute of this State prior to the adoption of this Chapter, until or unless it becomes a limited partnership under this Chapter, shall continue to be governed by the provisions of Chapter 17, of title 6 in effect prior to the adoption of this Chapter, except that such partnership shall not be renewed unless so provided in the original agreement.
§ 1732. Limited partners' derivative action brought in the right of a limited partnership to procure a judgment in its favor
(a) An action may be brought in the right of a limited partnership to procure a judgment in its favor by a limited partner.
(b) In any such action, it shall be made to appear that at least one plaintiff is such a limited partner at the time of bringing the action, and that he was such at the time of the transaction of which he complains, or that his status as limited partner devolved upon him by operation of law or pursuant to the terms of the certificate of limited partnership or written partnership agreement in effect at the time of the transaction of which he complains.
(c) In any such action, the complaint shall set forth with particularity the efforts of the plaintiff to secure the initiation of such action by the general partner or partners, or the reasons for not making such effort.
(d) If the action on behalf of the limited partnership was successful, in whole or in part, or if anything was received by the plaintiff or plaintiffs or a claimant or claimants as a result of a judgment, compromise or settlement of an action or claim, the court may award the plaintiff or plaintiffs, claimant or claimants, reasonable expenses, including reasonable attorneys' fees, and shall direct him or them to account to the partnership for the remainder of the proceeds so received by him or them. This subsection shall not apply to any judgment rendered for the benefit of injured limited partners only and limited to a recovery of the loss or damage sustained by them.
§ 1733. Act repealed
Except as affecting existing limited partnerships to the extent set forth in Section 1731, Chapter 17 of title 6 of the Delaware Code, is hereby repealed.
§ 1734. Fees
(a) For receiving and filing the certificate and for receiving and filing any amendment thereto required by this Chapter a fee of $100.00 shall be paid to the Secretary of State for each such document so received and filed.
(b) For certifying copies of any paper on file provided by this Chapter a fee of $7.50 shall be paid to the Secretary of State. In addition, a fee of $1.00 per page shall be paid in each instance where the Secretary of State provides the copies to be certified.
Section 2. This Act shall take effect on July 1, 1973.
Section 3. All rights, privileges and immunities vested or accrued by and under any laws enacted prior to the adoption or amendment of this Act, all suits pending, all rights of action conferred, and all duties, restrictions, liabilities and penalties imposed or required by and under laws enacted prior to the adoption or amendment of this Act, shall not be impaired, diminished or affected by this Act.
Approved June 25, 1973.